The Right Stuff
By Peggy Anne Salz, Thu Jan 30 12:38:00 GMT 2003

The rousing success of Vodafone's Vodafone Live! portal package proves Europeans like mobile data after all - but only when it's delivered Japanese-style.


Some three months after Vodafone broke on the scene with Vodafone live!, a package of consumer-focused mobile data services complete with picture messaging, arcade games and polyphonic ringtones, the mobile industry is suddenly upbeat about the prospects for mobile data.

Indeed, the numbers are encouraging. Vodafone, which launched the service in October in Germany, Italy, Ireland the Netherlands, Portugal, Sweden and the UK, counts 380,000 users with Vodafone live! enables handsets as of December 31. The total includes over 150,000 in Germany, over 90,000 in the UK and over 60,000 in Italy. The company aims to have one million customers using its service by end-March 2003 - and plans to add Greece, New Zealand and Australia this year.

But the Vodafone success story is about more than statistics. It proves operators can lure consumers to use mobile data - if they use the right bait. Moreover, it blows holes in the argument that cultural differences between European and Japanese users account for the lukewarm customer response to mobile data services in Europe and the phenomenal success of i-mode in Japan.

Free And Easy

Vodafone has been careful not to push technology. Sure, the basic technologies underpinning Vodafone live! include WAP, Java and MMS, but you won't hear a mention of them, or the four-letter word "GPRS," in the company's mega-million-dollar marketing campaign. (Vodafone won't divulge the budget, but observers speculate Vodafone is spending around $100 million.)

"Fun and entertainment are what customers should associate with Vodafone live!," says Mark Jensen, Vodafone senior product manager. The Vodafone live! target segment is the 15-34 age group. "Technology cannot be part of the message when you're talking to these consumers." How right he is.

Pricing is flexible - charging per session, for airtime or per downloadable game - and there are not subscription costs. Picture messaging and content browsing is free until the end of this month. Moreover, Vodafone has built up the billing capabilities to deliver mobile data to prepaid as well as post-paid users. This is a big deal considering it's the exclusion of prepaid users that is one of the main factors holding back i-mode services on in Germany, France and the Netherlands.

Granted, it remains to be seen if Vodafone live! can maintain its growth momentum once it starts to charge for its picture messaging services, but Vodafone also has a lot playing in its favor. "(Vodafone Live!) is an out-of-the box experience that is bound to get users hooked once they start using it," observes Paolo Pescatore, Senior Analyst, EMEA Wireless and Mobile Communications at IDC in the UK.

Users may notice a higher bill for MMS services at the end of January, but they won't be too annoyed since the service provides value for money, Pescatore says. "Customers are buying ease of use - mobile data has been around since WAP, but no one (until Vodafone) has made it so much fun."

Mirror Image

Jensen, who was instrumental in developing the Vodafone live! proposition and bringing it to market, admits that Vodafone also learned a few tricks from J-Phone, its Japanese subsidiary. "We realized we need to consider the user experience and we cannot provide a complete user experience if we don't look at the handsets and attract the right content providers," he says.

However, it's the similarities between Vodafone's service concept and NTT DoCoMo's i-mode service that are the most striking. Like i-mode, Vodafone live! has effectively gathered the best and brightest under its brand umbrella. They include global brands such as MTV for ringtones, CNN for news, Lastminute.com for flights, and local favourites such as Time Out for trendy restaurant and pubs tips in the UK.

More important, Vodafone is putting its money where its mouth is. The revenue split is 60-40, effectively providing brand name content companies an incentive to deliver the goods. Many players - at least outside Japan - still give content providers a raw deal. In comparison, i-mode partners generally get a 90% share.

No wonder content companies are lining up to join the party. Vodafone claims over 250 content providers have signed up to its global partnership program, although it's unclear how many services will be offered via the portal. Against this backdrop Jensen stresses that the customer will "benefit from a steady flow of content over the next 4-5 months." The games arcade alone "may add another 10 top name games in the next month alone."

Seismic Shift

But the real excitement - or apprehension depending on where you sit in the value chain - is around Vodafone's move to dictate mobile phone features and standards. The company has specially designed a color, icon-based service menu - and will not tolerate handset manufacturers tampering with this interface in any way.

Moreover, Vodafone is also in the driver's seat when it comes to the hardware. To date Vodafone Live! service is available on three handsets: the Nokia 7650, the Panasonic GD87 and the Sharp GX-10. The Sharp handset has been developed according to Vodafone's own specifications, and is exclusive to Vodafone for six months from the launch. Moreover, the Sharp device boasts a specially developed "hot button" for rapid access to the Vodafone live! menu.

Sound familiar? DoCoMo also ordered phones to be produced according to its specifications. The Vodafone approach represents a "shift in the balance of power" and puts the operator in control, notes John Delaney, Principal Analyst specialized in wireless and MMS at Ovum in the UK.

It doesn't mean incumbent manufacturers such as Nokia will suffer, but it does "put a chink in their armor," Delaney says. "Certainly more operators in Europe will insist on specifying handsets. Overall, it sets an encouraging precedent that the industry will go more in that direction."

Indeed, the success of Vodafone live is not just, as Delaney suggests, a "bellwether for the prospects of mass market data services in Europe" a la i-mode. It is also a test of whether operators and handset manufacturers shouldn't pursue an entirely new business model in which the services determine the hardware features and not the other way around.

Moving ahead expect to see more operators following in Vodafone's footprints. Already Samsung and NEC have capitulated to Hutchinson 3G, and Orange's new SPV branded phone was made to order by Taiwan's HTC. This shift in the business model may deliver better mobile data services, but it will also turn up the pressure on handset manufacturers to let the operators call the shots. Incumbent handset manufacturers are well advised to swallow their pride and listen more closely to operator demands. If they don't there are lots of low-margin hardware makers more than happy to oblige.



Peggy Anne Salz is a freelance author who likes to go beyond the day-to-day developments in the mobile space to grapple with the toughest issue: where the industry is going.Her work has appeared in a number of publications including Time, Fortune and The Wall Street Journal Europe, as well as Communications Week International, where she is one of the editors.